EASTERN EUROPE/EU: Dangers await big bang enlargement

Analysis

The European Commission yesterday issued its last round of regular reports before the end of the accession negotiations. It confirmed its earlier conclusion that Cyprus, Malta and eight of the Central and East European candidates -- the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia -- are ready to join in 2004. The Commission praised the progress that all the candidates had made in implementing the EU's norms and policies over the past year, and confirmed that they would meet all the political and economic criteria, as well as having taken on the EU's whole body of laws and regulations. The Commission also included in its 'Strategy Paper' a defence of its methodology in producing these assessments, in order to answer critics among the existing member states who questioned the Commission's judgements in the 2001 reports.

On Bulgaria and Romania, the Commission praised the progress they had made in the past year (see EASTERN EUROPE: EU accession alone cannot deliver reform - OADB, August 10, 2001, IV. ), and endorsed these countries' self-imposed 'indicative' date for accession -- of 2007. However, the reports on the individual countries demonstrate a widening gap between them; Bulgaria has now closed 22 chapters in negotiations, whereas Romania is well behind with 13. The Commission proposed a significant increase in the EU's financial assistance to the two countries and promised detailed 'road maps' for their progress towards membership, particularly concerning judicial and administrative reform. It is likely that these countries will be joined by further candidates over the next few years, so that the next round of accession could be larger than currently envisaged. However, Turkey has still not been put in the same category as Bulgaria and Romania, because the Commission did not suggest setting a date for Ankara to begin negotiations (see EASTERN EUROPE: EU accession alone cannot deliver reform - OADB, March 13, 2002, I. ).

Continued concerns . Despite the Commission's repeated assertions that ten countries are ready to join, it has again raised concerns about administrative and judicial capacity in the region. The Commission proposes two methods of protecting the EU against any such problems:

1. Monitoring report . The Commission will continue monitoring the countries' progress in implementing and enforcing its rules and regulations right up until membership, and it will produce a 'comprehensive monitoring report' six months before the date of accession. This mechanism will allow the EU to continue checking whether the candidates are meeting the promises they have made in negotiations, and sticking to the agreed timetables for implementation. If necessary, monitoring could be used to delay the entry of a candidate that seriously breached the commitments it had made in negotiations.

2. Safeguard clauses . The Commission plans to write a safeguard clause into the accession treaty to protect the current member states if enlargement causes significant disruption to the EU's internal market. One of the clauses, based on previous enlargements, could be used if any sector of the economy suffered difficulties, or a particular region saw a serious deterioration in its economic situation -- but it must not involve frontier controls. In addition, the Commission has proposed a specific internal-market safeguard authorising it to take unspecified measures if there is a serious breach of the functioning of the internal market, especially in food safety. The mechanism is to remain in place for two years, and could be implemented by the Commission on its own initiative or at the request of a member state. This clause would give the Commission considerable latitude to protect markets if a candidate country did not fulfil the obligations it took on in negotiations.

Full membership . When the candidates join, they will not automatically be members of the EU's Schengen area (see EUROPEAN UNION: Growing pressure on asylum policy - OADB, July 17, 2000, II. ), or of its single currency. Both of those aspects of membership will be subject to further preparations and assessments of readiness:

Schengen .There will be a two-stage mechanism for joining the Schengen area, within which travel is passport-free. The new members must apply the EU's procedures to their external borders with non-EU states such as Ukraine immediately on accession, including EU visa policies. However, their frontiers with current member states (such as Germany, Austria and Italy) will remain subject to passport and customs checks until an unspecified date when the EU decides that they are ready to join the Schengen area fully. Since the Council will decide this for each country individually, the land barriers across Europe will fall only slowly, and one at a time.

Euro entry .The Commission expects the new members to join the Exchange Rate Mechanism II (ERM II) "some time" after accession, but has not determined a timetable (see EASTERN EUROPE: ERM II allows time for convergence - OADB, March 27, 2002, IV. ). The candidates would probably have to spend at least two years in the ERM II before proceeding to join the euro, in addition to meeting the convergence criteria. The likely timing of euro accession is thus still vague, and the European Central Bank is cautious about early entry.

Stumbling blocks . The Commission recommends that the EU should conclude negotiations in December, as planned, with the aim of signing the accession treaty in spring 2003. The main outstanding issues concern deals to be struck between the current member states. The key issue is the budget, and whether net contributors and net recipients can agree on the principles under which new members will receive transfers from the agricultural and regional funds. It should be possible for the EU to find a deal on this question during 2004-06 -- in the first years after enlargement, and as the current budgetary framework comes to an end. The more problematic question is whether the most hardline member states (the Netherlands on the contributor side and France on the recipient side) will insist that the principles for reform of the budget after 2006 should be settled now. This might drag out the negotiations considerably. The EU aims to thrash out a deal at the Brussels summit on October 24.

In addition to the budget question, the Irish referendum on the Nice Treaty on October 19 could block the proposed timetable for enlargement. If the Irish vote 'no' to Nice for a second time, the EU would be technically unable to proceed with enlargement beyond 20 member states until it decided upon a new set of rules for voting in the Council and electing members of the European Parliament (see EUROPEAN UNION: Ireland and CAP dog accession outlook - OADB, July 15, 2002, IV. ). There are considerable legal uncertainties about how to deal with a second Irish 'no', and it is not self-evident that a separate deal could be secured in time to proceed with enlargement in 2004. Even if a solution could be found, it might delay the referenda on accession in the applicant countries -- as well as ratification in the current member states -- until very late in 2003.